Total revenue for the third quarter of 2018 was $21.4 million, an 11% decrease compared to $24.0 million reported for the third quarter of 2017. Third quarter 2018 and 2017 licensing and related revenue were $9.8 million and $14.0 million, respectively. Royalty revenue for the third quarter of 2018 was $11.6 million, an increase of 16% when compared to $10.0 million reported for the third quarter of 2017.

Gideon Wertheizer, CEO of CEVA, stated: “We are pleased to report a solid third quarter, reflecting a healthy licensing environment, in particular in China, and strong royalty revenue recovery. In licensing, the demand for our short range connectivity and cellular technologies result from our leadership and comprehensive offerings for Bluetooth, Wi-Fi, 5G and NB-IoT. We are strategically positioned to exploit all market segments and usage models, as wireless IP is complex, scarce and mandatory for all IoT-related products. On royalties, the wide deployment of our advanced DSP technologies within the latest generation of the world’s most successful smartphone, and the continued growth of shipments from our non-handset baseband customers were the main catalysts for 56% sequential growth.”

GAAP net income and diluted earnings per share for the third quarter of 2018 was $2.5 million and $0.11, respectively, compared to $5.9 million and $0.26 reported for the same period in 2017.

Non-GAAP net income and diluted earnings per share for the third quarter of 2018 were $5.2 million and $0.23, respectively, compared to $8.3 million non-GAAP net income and $0.36 diluted earnings per share reported for the third quarter of 2017. Non-GAAP net income and diluted earnings per share for the third quarter of 2018 excluded: (a) equity-based compensation expense, net of taxes, of $2.5 million, and (b) the impact of the amortization of acquired intangibles of $0.3 million associated with the acquisition of RivieraWaves and NB-IoT technologies. Net income and diluted earnings per share for the third quarter of 2017 excluded: (a) equity-based compensation expense, net of taxes, of $2.1 million, and (b) the impact of the amortization of acquired intangibles of $0.3 million associated with the acquisition of RivieraWaves.

During the quarter, CEVA completed thirteen license agreements. Four of the agreements were for CEVA DSP and AI platforms, and nine were for CEVA connectivity IPs. All agreements were for non-handset baseband applications and four were with first-time customers of CEVA. Customers’ target markets for the licenses include ADAS, consumer and industrial IoT connectivity, and wireless audio.

Geographically, nine of the deals signed were in China, one was in the U.S. and three were in the APAC region, including Japan.

Yaniv Arieli, Chief Financial Officer of CEVA, stated: “We saw a strong recovery in the third quarter in shipments from our customers, including a record 98 million non-handset baseband units, of which 83 million were Bluetooth devices. On buyback, we purchased approximately 216,000 shares of our common stock during the third quarter for an aggregate consideration of approximately $6.3 million. Moreover, CEVA’s cash and cash equivalent balances, marketable securities and bank deposits were approximately $167 million at the end of the quarter.”

CEVA Conference CallOn November 8, 2018 CEVA management will conduct a conference call at 8:30 a.m. Eastern Time to discuss the operating performance for the quarter. The conference call will be available via the following dial in numbers:

U.S. Participants: Dial 1-844-435-0316 (Access Code: CEVA)

International Participants: Dial +1-412-317-6365 (Access Code: CEVA)

The conference call will also be available live via webcast at the following link: https://www.webcaster4.com/Webcast/Page/984/27722. Please go to the web site at least fifteen minutes prior to the call to register, download and install any necessary audio software.

For those who cannot access the live broadcast, a replay will be available by dialing +1-877-344-7529 or +1-412-317-0088 (access code: 10124765) from one hour after the end of the call until 9:00 a.m. (Eastern Time) on November 15, 2018. The replay will also be available at CEVA’s web site www.ceva-dsp.com.

About CEVA, Inc.CEVA is the leading licensor of signal processing platforms and artificial intelligence processors for a smarter, connected world. We partner with semiconductor companies and OEMs worldwide to create power-efficient, intelligent and connected devices for a range of end markets, including mobile, consumer, automotive, industrial and IoT. Our ultra-low-power IPs for vision, audio, communications and connectivity include comprehensive DSP-based platforms for LTE/LTE-A/5G baseband processing in handsets, infrastructure and cellular IoT (NB-IoT and Cat-M1) enabled devices, advanced imaging and computer vision for any camera-enabled device, audio/voice/speech and ultra-low power always-on/sensing applications for multiple IoT markets. For artificial intelligence, we offer a family of AI processors capable of handling the complete gamut of neural network workloads, on-device. For connectivity, we offer the industry’s most widely adopted IPs for Bluetooth (low energy and dual mode) and Wi-Fi (Wi-Fi 4 (802.11n), Wi-Fi 5 (802.11ac) and Wi-Fi 6 (802.11ax) up to 4×4). Visit us at www.ceva-dsp.com and follow us on Twitter, YouTube,Facebook and LinkedIn.

Forward Looking StatementThis press release contains forward-looking statements that involve risks and uncertainties, as well as assumptions that if they materialize or prove incorrect, could cause the results of CEVA to differ materially from those expressed or implied by such forward-looking statements and assumptions. Forward-looking statements include Mr. Wertheizer’s statements about CEVA being strategically positioned to exploit all market segments and usage models, as wireless IP is complex, scarce and mandatory for all IoT-related products. The risks, uncertainties and assumptions that could cause differing CEVA results include: the ability of the CEVA DSP cores and other technologies to continue to be strong growth drivers for us; our success in penetrating new markets, including in non-baseband markets, and maintaining our market position in existing markets; our ability to diversify the company’s royalty streams, the ability of products incorporating our technologies to achieve market acceptance, the speed and extent of the expansion of the 4G, 5G and LTE networks, the maturation of the IoT market, the effect of intense industry competition and consolidation, global chip market trends, the possibility that markets for CEVA’s technologies may not develop as expected or that products incorporating our technologies do not achieve market acceptance; our ability to timely and successfully develop and introduce new technologies; and general market conditions and other risks relating to our business, including, but not limited to, those that are described from time to time in our SEC filings. CEVA assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

CEVA, INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME – U.S. GAAP

U.S. dollars in thousands, except per share data

Three months ended

Nine months ended

September 30,

September 30,

2018

2017

2018

2017

Unaudited

Revenues:

Licensing and related revenues

$ 9,786

$14,021

$29,907

$33,893

Royalties

11,627

10,023

26,569

32,013

Total revenues

21,413

24,044

56,476

65,906

Cost of revenues

2,006

1,726

5,966

5,030

Gross profit

19,407

22,318

50,510

60,876

Operating expenses:

Research and development, net

11,897

10,031

35,756

30,413

Sales and marketing

2,727

3,057

9,302

9,422

General and administrative

2,406

2,711

8,193

7,388

Amortization of intangible assets

225

309

676

927

Total operating expenses

17,255

16,108

53,927

48,150

Operating income (loss)

2,152

6,210

(3,417)

12,726

Financial income, net

831

821

2,535

2,147

Income (loss) before taxes on income

2,983

7,031

(882)

14,873

Income taxes expense

440

1,181

847

1,008

Net income (loss)

$ 2,543

$ 5,850

$ (1,729)

$13,865

Basic net income (loss) per share

$0.12

$0.27

($0.08)

$0.64

Diluted net income per share

$0.11

$0.26

($0.08)

$0.62

Weighted-average number of Common Stock used in computation of net income per share (in thousands):

Basic

21,997

21,946

22,091

21,687

Diluted

22,428

22,683

22,091

22,480

Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures

U.S. Dollars in thousands, except per share amounts

Three months ended

Nine months ended

September 30

September 30

2018

2017

2018

2017

Unaudited

GAAP net income (loss)

$2,543

$5,850

($1,729)

$13,865

Equity-based compensation expense included in cost of revenue

155

125

480

330

Equity-based compensation expense included in research and development expenses

1,246

991

3,874

2,834

Equity-based compensation expense included in sales and marketing expenses

369

381

1,246

1,040

Equity-based compensation expense included in general and administrative expenses

697

722

2,483

2,142

Income tax benefit related to equity-based compensation expenses

(118)

(84)

(400)

(268)

Amortization of intangible assets related to RivieraWaves transaction and in 2018 NB-Iot technologies

303

309

937

927

Non-GAAP net income

$5,195

$8,294

$6,891

$20,870

GAAP weighted-average number of Common Stock used in computation of diluted net income (loss) per share (in thousands)